As the 2017 tax year draws to a close, many of you may wish to make final ad hoc contributions to your retirement annuities and tax free savings accounts. Below we discuss the maximum contributions you can make to fully utilise your tax allowance.
RETIREMENT ANNUITIES
All individual tax payers who contribute towards a retirement fund will qualify for a tax deduction up to 27.5% of the greater of gross remuneration or taxable income. This rate applies to the aggregate of contributions made to an individual’s pension, provident and retirement annuity funds.
The annual tax deduction cap is R350 000 (including the cost of risk benefits). Individuals who contribute more in any one year can carry forward any unclaimed amount and deduct these from tax in subsequent years, subject to the deduction limits in those years.
As an example, a self-employed individual earning R300,000 per annum contributing the maximum 27.5% (R82,500 per year) to an RA, will get a tax rebate of close to R24,750 (based on an assumed marginal tax rate of 30%).
If, to date, you have contributed less than the maximum tax-deductible amount to your RA, you can use any additional cash to top up your RA and enjoy the full tax benefit.
TAX FREE SAVINGS ACCOUNT
You are able to maximise your investment returns by contributing the maximum R30,000 per annum to a Tax Free Savings Account (lifetime limit R500,000) as the interest, capital gains and dividends you earn on these investments are completely tax free.
To confirm your possible tax-free lump sum top-up amount remember to deduct contributions which you have already made during the 2017 tax year.
Please contact us as soon as possible should you wish to make an additional contribution/ top-up.